Committee Reports > List of Committees > Dáil > 1993 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1990

Appendix 1

MINUTE OF THE MINISTER FOR FINANCE

MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT
DATED 25 JULY 1991 OF THE COMMITTEE OF PUBLIC ACCOUNTS
ON THE APPROPRIATION ACCOUNTS 1987

PART I - INTERIM REPORTS

(The First Interim Report (Excess Expenditure - Superannuation and Retired Allowances) does not appear to call for comment.)

Second Interim Report - Sale of State Shareholding in Tara Mines Ltd

The Minister appreciates the concern of the Committee, arising from the sale of the State shareholding in Tara Mines Ltd, that future agreements entered into on behalf of the State should not impinge on procedures for public accountability. While this general principle is accepted, it is not feasible to introduce a prohibition on agreements which may include certain restrictions on the disclosure of information. Each case has to be considered on its own merits as in certain circumstances it may be necessary, in the national interest, to enter into such agreements. The Minister, however, would assure the Committee that every effort is made to uphold all aspects of public accountability procedures.

With regard to the terms of reference of the Committee, the Minister would refer to paragraph 4.11 of the White Paper on the Role of the Comptroller and Auditor General, which outlines proposed revised terms of reference for the PAC. These were framed in the context of the expanded role of the Comptroller and Auditor General, as outlined in the White Paper and embodied in the Comptroller and Auditor General (Amendment) Act 1993, which has recently been enacted. The Government will propose revised terms of reference for the PAC to the Dail and these will be broadly in line with those outlined in the White Paper, subject to certain changes to take account of matters raised during the debate on the Act in the Dail.

PART II - PARTICULAR ACCOUNTS

(Paragraph 40 (National Lottery Grants) does not appear to call for comment.)

General

Paragraph 1: Matured Liabilities

The Minister notes the endorsement by the Committee of Public Accounts of the view of the Comptroller and Auditor General that the deferral of matured liabilities by some Departments was not in accordance with prescribed financial procedures.

He wishes to confirm in this regard that the Joint Department of Finance/Office of the Comptroller and Auditor General Working Group referred to by the Committee is addressing the issue of matured liabilities and its proposals will be submitted to the Committee later this year.

The Group already made an interim report on matters relating to the format of the Appropriation Accounts and to the content of the accompanying notes. The Report took account of the Committee’s concern that notes on variation from grant should be factual and meaningful. The Group’s recommendations are being implemented in regard to the 1992 Appropriation Accounts.

AGRICULTURE AND FOOD

Paragraph 2: Misappropriation at Veterinary Research Laboratory

The Minister has been advised that the Department of Agriculture, Food and Forestry is satisfied that the revised improved procedures implemented by that Department following the incident referred to have strengthened the control system and guarded against any recurrence of irregularity. The procedures will be subject to continuing reviews to ensure their effectiveness.

Paragraph 3: ACOT Claim from European Social Fund

The Minister has been advised that the position regarding eligibility for EC funding for Teagasc (formerly ACOT) training courses has changed since this problem arose in 1985. Eligibility for ESF funding is now clearly defined and all of Teagasc’s training activities qualify. Since 1990 the total ESF aid to Ireland is set out in the Community Support Framework 1989-1993. The Department of Enterprise and Employment has been designated as the lead Department for co-ordination of ESF aid.

Paragraph 4: Bovine TB and Brucellosis Eradication

Special Inquiry

During 1992, the Public Accounts Committee held a comprehensive special inquiry into the Bovine TB Eradication Scheme and all ERAD matters commented on below were examined by the Committee in depth. An independent cost benefit analysis undertaken by Professor Sheehy of U.C.D. on the effectiveness of the four year ERAD programme was covered in this inquiry. The Sheehy Report concluded that the Scheme was cost-effective, particularly in terms of access to export markets. The Report of the special inquiry has not yet been published.

The Minister has been advised that while over 99% of animals in the seven million cattle population are free of bovine TB, progress towards final eradication remains difficult. A combination of causes is involved. ERAD, which was established in April 1988, has largely determined the scope of the problem, which it has addressed in a variety of ways.

A consolidated series of actions was introduced which was designed to focus strongly on the disease dynamics. Among these were

-an intensive testing regime; some 42 million tests have been carried out since 1988, with infective-type herds receiving particular attention;

-a comprehensive research programme aimed at providing the technology necessary to move towards eradication; and

-a revamped reactor grant regime including Income Supplement for hardship cases.

The ERAD programme concluded that significant progress was not possible until substantial resources could be applied to developing new technology including blood tests and fully computerized movement control, together with an appropriate strategy to take account of infection arising from wild life sources.

The ERAD 4 year term concluded in April 1992 and in accordance with the requirement under PESP the Minister for Agriculture and Food set up an Interests Group comprising the farming and veterinary organisations (IFA, ICMSA, ICOS, Irish Veterinary Association and Irish Veterinary Union) to review progress under ERAD and devise an agreed consensus on the Bovine TB programme for the period May 1992 - April 1996. The consensus of the Group is that the format of a non-statutory agency within the Department of Agriculture, Food and Forestry, such as ERAD, should continue. With the exception of a small number of issues, the thrust of the Programme has largely been agreed.

The scope of the Programme is contingent on securing EC funding amounting to some £60 million over a 3 year period (1994-96). To date Ireland has been unable to draw down the funding under an existing Decision, largely because the Irish Veterinary Union would not accept the Commission’s requirement for full alternation of testing, because of practitioners’ fears of one practitioner poaching farmer clients from another. Discussions are ongoing between the Department of Agriculture, Food and Forestry and Brussels with a view to securing funding under revised conditions.

The funding conditions were outlined by the Commission following a visit to Ireland last October. There is still resistance from the Irish Veterinary Union to changed arrangements for pre-movement testing. The main difficulty at this stage is the adequacy of the EC veterinary fund. In the light of numerous requests by Member States for funding, it is necessary that the overall Veterinary Fund budget be increased and Ireland is exerting pressure on the Commission’s budgetary section, the funding of clearance by the Commission’s budgetary section, the funding request would be discussed in the Standing Veterinary Committee. The availability of EC funding would pave the way for consideration of a new ERAD regime including a Board and Director, and allow for the commencement of the new options in the operation of the scheme, including reduction in levy and Exchequer contribution.

The 1992 TB Round of testing was perhaps the most complete round ever achieved within a 12 month period, given that virtually all 7 million animals in all 172,000 herds were tested within the calendar year. Some 35,062 reactors were disclosed, less than the previous year’s figure of 36,382. The APT of 3.3 was also less than the 1991 figure of 4.4 (APT=reactors per thousand tests). The outturn indicates a slightly reduced incidence. However, it remains to be seen whether the downward trend will continue.

While Brucellosis has largely been eliminated, there is concern at the rate of progress towards final eradication. A key factor is the role of certain dealers, who sell potentially infective culled cows into dairy and suckler herds. The issue has been listed as a priority for the new Agency when established; consideration is currently being given to devising the most appropriate strategy to meet the situation.

Prevalence of bovine TB in Northern Ireland and in Britain

The Minister is advised that there are in general lower rates of bovine TB in Britain and in Northern Ireland. The eradication programme in the UK commenced at a much earlier date, that is in the 1930s when animal populations were relatively smaller.

Ireland’s eradication programme commenced in the 1950s, in parallel with rapid expansion in cattle numbers. The pattern of farming in the UK is also different in terms of animal movement, the holdings in the main being large with animals in most cases remaining on the same farm from birth to slaughter. Excessive movement of animals from farm to farm is recognised as a key factor in the spread of bovine TB.

Northern Ireland has for a number of years had the benefit of a computerised movement permit system, controlling the movement of animals from one location to another.

The trading pattern in Ireland involves a large number of animal movements. Currently, animals can move anywhere on the basis that the cattle identity card indicates that the animal has been tested within the previous 60 days. The development of a sophisticated animal movement permit/headage computerised project has commenced and will be in place in 3 to 5 years. This will monitor and control strictly all animal movement from one location to another. In addition, the advent of certain CAP reform premia will, it is anticipated, reduce the degree of movement as animals will be retained to attract the premia payments.

Research is continuing on development of blood tests for Bovine TB, which will complement the existing tuberculin test in identifying carriers of the disease.

Paragraph 5 : Inadequate Supervision and Control of Beef Export Refunds

The Minister shares the concern of the Committee that control inadequacies should exist in any area of activity, in particular in those areas in which the value in terms of EC or national financing is high. The Minister is assured that all of the issues referred to by the Committee in this paragraph have been corrected, that control procedures generally have been strengthened and upgraded and that the procedures are kept under constant review.

Paragraph 6 : Irregularities in regard to cattle and Beef Exports

The Minister has been advised that the eventual settlement involved the acceptance by the companies concerned of £1.3 million in export refunds in lieu of the £3.5m they were seeking to recover from the Department of Agriculture, Food and Forestry. The Minister is pleased to inform the Committee that the EC Commission has agreed to Community financing of this £1.3 million.

The Commission accepted that the failures of control found in the Waterford case did not involve negligence by the Irish authorities and agreed that the Irish exchequer should not suffer any loss arising from this. The Minister is assured that, as a result of the irregularities discovered at Waterford, Customs’ controls and monitoring procedures have been upgraded and are constantly being reviewed and further upgraded if and when necessary.

Paragraph 7 : Beef Aids for Private Storage Irregularity

The Minister has been advised that detailed control procedures and seminars for Department of Agriculture, Food and Forestry control officers at beef factories in advance of the introduction of Aids for Private Storage (APS) Schemes are an integral part of overall control arrangements. Those procedures, which include training seminars for control officers, are under continuous review. Control officers of both the Department of Agriculture, Food and Forestry and the Revenue Commissioners have and do exercise full authority to ensure that the regulatory provisions are observed even where this means slowing down production at peak times. It is recognised that at peak times control work is more difficult. The Minister understands that even in advance of any recommendations which may emanate from the Beef Tribunal a plan for the upgrading of controls in the beef sector is at an advanced stage of development, and a number of new procedures are already in place. As there has been no APS scheme for beef since 1989 these new procedures are currently being applied to the beef intervention scheme but will automatically apply to APS in the event of a new scheme being introduced.

The updated control system has included the setting up of a new Beef Controls Division which is responsible for systematic unannounced visits to beef plants and cold stores, on a regular basis. The unannounced visits include post-factory checks on random selections of all aspects of the plants’ and cold stores’ intervention activities. Already there has been considerable success in this regard. In addition a number of additional new staff have been assigned to beef plants to augment existing staff there.

In conjunction with this new Beef Controls Division a Systems, Investigation and Training Section has been set up which is responsible for follow-up investigations and for monitoring the inspection system. This includes a regular monitoring of the control arrangements, reviewing the documentary and office procedures, updating the sanctions applicable and liaising with the other State agencies involved - customs, gardai and the legal services. That Section is also responsible for putting in place an extensive training programme for control officers.

In addition, all meat traders, meat processors, cold stores and sub-contractors involved in market support schemes will in future be registered by the Department of Agriculture, Food and Forestry and all must formally undertake to abide by the regulatory provisions. An overall contract between sellers of beef into intervention and the Minister for Agriculture, Food and Forestry is being introduced. This new obligatory intervention contract will create a situation where every processor intending to offer beef into intervention must first enter into a cardinal intervention contract with the Minister which will govern the contractual duties and obligations of both parties in respect of all intervention purchase agreements. Added to this, the terms and conditions of the existing deboning contract and the purchase agreement have been updated and their importance in terms of the payments made on the basis of the information contained in them is being restressed and reinforced.

This whole new approach will provide a unified, streamlined control system with full departmental control at the point of intake; a strong supervisory presence at other points of the intervention chain; a switch in emphasis from the permanent presence towards post factum scrutiny with extrapolated penalties; a measure of mobility between plants in the assignment of control officers and strong investigative and training functions.

With regard to the role of Customs Officers, the Minister has been informed that, while various types of control checks are specifically provided for in the instructions to Customs staff engaged in controlling CAP goods entitled to payment of export refunds, the staff’s attention is drawn also in their standing instructions to various possibilities for fraud, including fraudulent misdeclaration of weights. The Customs staff are instructed and are expected to exercise extreme vigilance in their supervising role and, for example, to acquire sufficient knowledge of a trader’s records to enable declared quantities to be verified. The particular irregularities in the case in point were discovered by Customs in the course of their ordinary duties. The uncovering of the particular modus operandi used in the case led in the normal course to a requirement on traders generally to maintain additional records which would facilitate discovery of similar irregularities in future.

The Minister understands that Customs do not maintain a full-time presence at meat factories and are not involved in supervising production on the factory floor. This is a responsibility of the Department of Agriculture, Food and Forestry.

The Minister also understands that Customs carry out control checks on a spot-check basis at different stages between placing meat under control and its exportation. These checks are carried out, for example, when boxed beef (i) is being placed in storage (ii) is in cold store (iii) is being removed from cold store for export and (iv) is presented to Customs at the point of export. The level of Customs checks would in no way be affected by a trader’s preoccupations with maximising efficiency on the production line.

The Minister has been informed that the Committee was advised on 27 November 1991 that the Director of Public Prosecutions issued directions on 20 May 1991 to the effect that no prosecution was warranted in the irregularity referred to in this paragraph.

Paragraph 8 : Beef Sampling Operations

The Minister has been informed that, of the five companies concerned, three have paid penalties totalling £0.713 million imposed on them arising from the beef sampling operation in 1989. One of those three companies has sued for recovery of the amount of £90,000 paid by it. The case is being defended, but there has been no substantive progress in the proceedings.

The other two companies have refused to pay the penalties demanded from them, which total £2.9 million, and have issued legal proceedings, including applications for interlocutory injunctions to prevent approaches to the guarantors.

The position on these two cases is as follows:

(1)The company went into liquidation in early 1992. The application for interlocutory injunction which came before the Courts in June 1992 was not proceeded with by the liquidator. The Court lifted the interim injunction obtained by the Company in 1991. The liquidator is pursuing the main action which has yet to be heard by the Courts. Demands for £1.418 million in total issued to the three guarantors in June 1992. One of the guarantors paid the amount of £0.146 million demanded. The other two guarantors (both insurance companies) refused to pay until such time as the Courts rule on the main action. Papers have been referred to the legal services for issue of proceeding against these two guarantors. The main action is being defended.

(2)In the case of the second company the application for interlocutory injunction was withdrawn by the company in October 1992. The main action has not been withdrawn. Demands issued to the two guarantors in November 1992 for £1.526 million in total. One of the guarantors paid the sum of £8,236 demanded. The Company has taken proceedings in the French Courts to restrain the second guarantor, a bank based in France, from meeting the Department’s demand (£1.518 million) until such time as the substantive issue in the main action is ruled on by the Courts. The Irish company’s main shareholder, which is based in France, has intervened in the French proceedings. The Department of Agriculture, Food and Forestry is defending the actions in the French Courts and the main action in the Irish Courts.

The Director of Public Prosecutions has decided that the files should not be referred to the Garda Authorities for the purpose of a possible criminal investigation. The Minister is advised that the Committee was informed accordingly, by the Department of Agriculture, Food and Forestry, on 26 February 1993.

MARINE

Paragraph 9 : Expenditure in relation to the Wreck of the MV “Kowloon Bridge”

The Minister is advised that as legal proceedings for recovery of costs incurred by the State in dealing with the damage posed to the marine environment by the wreck of the MV “Kowloon Bridge” are ongoing, it would be inappropriate for the Minister to make a statement on the matter. The Department of the Marine has advised that the matter is not expected to come to trial before the end of 1993.

The Minister is also advised by the Department of the Marine that legislative and other arrangements have been put in place since the setting up of the Department of the Marine in 1987, to deal effectively with a “Kowloon Bridge” type incident as follows:

(1)the establishment in 1991 of the Irish Marine Emergency Service (IMES) to assume responsibility for the operational aspects of maritime safety, rescue shipwreck and sea and coastal pollution;

(2)the Oil Pollution of the Sea (Civil Liability and Compensation) Act, 1988 which enabled Ireland to ratify the Civil Liability Convention, 1969, the Fund Convention, 1971 and their 1976 Protocols;

(3)the Sea Pollution Act, 1991 which will enable Ireland to ratify the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78);

(4)the preparation of a Bill to amend and consolidate the Statute law on wreck and salvage and to give effect in domestic law to the International Convention on Salvage, 1989. Observations have been sought from other Departments prior to requesting Government approval for the scheme of the Bill.

INDUSTRY AND COMMERCE

Paragraph 10 : Export Guarantees and Market Entry and Development Scheme (MEDS)

The Minister is advised by the Department of Enterprise and Employment that following a review by Coras Trachtala of the Market Entry and Development Scheme it was decided to end the scheme in mid-1989 and no new applications were accepted after that date. The Minister is informed that on the effective expiry of the scheme in 1992, exports achieved under the scheme reached £81.5 million or 65 per cent of targets set and refund of the promotional expenditure involved was of the order of £2.7 million or 75 per cent of the total monies advanced under the scheme. The Department of Enterprise and Employment regard this outcome as satisfactory given the risks involved in export marketing.

In the case of the two firms who were unable to repay loans under the MEDS, the Minister is informed that this was the result of severe difficulties in the US market which could not have been foreseen despite the strict screening procedures operated by Coras Trachtala (now An Bord Trachtala).

In 1990 the Scheme was replaced by a Targeted Marketing Consultancy Programme which is more closely tailored to the current needs of exporters and is ERDF funded at a rate of 75 per cent.

OFFICE OF THE ATTORNEY GENERAL

Paragraph 11 : Fees to Counsel

Very high fees for State Counsel arise only in a minority of cases involving constitutional or other issues of particular complexity. In pursuing such cases, the Attorney General may consider it necessary in the interest of the State to have access to particular expertise and outside advice. Fees payable to State Counsel in the vast majority of cases handled by the Office of the Attorney General and the Office of the Director of Public Prosecutions are settled within limits pre-determined by the Department of Finance.

GARDA SIOCHANA

Paragraph 12 : Failure to register cleaners for PAYE/PRSI

The arrears of PAYE and PRSI which arose in this instance were subsequently collected and the proper procedures have been put in place. Nevertheless the Minister shares the Committee’s concern that public servants should comply with their legal obligations as employers.

Paragraph 13 : Inadequate Stocktaking Procedures

The Minister is advised that there have been very positive developments in the operation and management of the Garda stores and that the shortcomings which were highlighted by the Comptroller and Auditor General have been eliminated.

The most significant development has been the gradual reduction in the type and quantity of goods which are held in central stores, which has eased the pressure on accommodation. As many stores items as possible are purchased locally unless significant savings can be achieved by central bulk purchase. Uniforms and certain other centrally purchased items are now delivered direct to stations and in general goods are despatched as promptly as possible following receipt into central stores.

A computerised stores system in the Barrack-Master’s stores came into operation in 1992. The system will facilitate improved recording of stock movements and afford greater control of stock levels. The feasibility of extending the system to the Transport stores or, alternatively, introducing a combined fleet management/stores computer system is currently being examined.

Stocktaking has been carried out on an annual basis in the Barrack-Master’s and Transport stores since 1988 and only minor discrepancies have been found between recorded and actual stocks. New shelving in the Barrack-Master’s stores has improved storage and access.

Six civilian storekeepers have replaced Gardai in the stores with effect from January 1991. A civilian Fleet Manager, who is a qualified engineer, was appointed in February 1991 to provide the Garda Siochana with professional advice and assistance in the management of the Garda and Ministerial transport fleets.

The Minister is assured that the present Garda stores system is more efficient and subject to stricter controls. While the full benefits of computerisation and civilianisation have yet to be realised, these measures will, in time, contribute to further improvements in the operation of the stores.

COURTS

Paragraph 14 : Warrants for Unpaid Fines

Although the procedures for accounting for warrants as cited in the C&AG’s report were not being followed in the Dublin Metropolitan District Court (DMDC) Office, the Minister is assured that this situation did not arise because of lapses in internal or Departmental controls. In the DMDC Office alternative procedures had been operated between 1969 and 1987. The reason for an exception from the prescribed procedures being made in the DMDC Office was to cater for the very heavy volume of warrants dealt with in this area while at the same time providing the necessary control. During the period in question only one register was maintained of all warrants issued by the DMDC Office. This was kept at the Bridewell Garda Station, a building adjoining the warrant issuing office and it was available for inspection by Courts staff as and when required. Because of the heavy work load it was considered that the maintenance of a separate duplicate warrants register in the DMDC Office was unnecessary and time-consuming. The Fines Register which is maintained in the DMDC Office includes a record of all warrants issued and re-issued, fines paid and cancellations, etc. This was available as a cross-check since any discrepancies would have become evident from this register so that appropriate follow-up action could be taken.

Since March 1988 the procedures have been updated and records are kept on the DMDC computer. A computer-generated list accompanies practically all warrants issued to the Gardai, which is receipted and returned to the DMDC Office. A small proportion of warrants issued by the DMDC (e.g. those originating in District Courts outside the metropolitan area which are not computerised) are accompanied by a handwritten list which is likewise receipted and returned.

As regards the position in Garda stations, the response of the Accounting Officer indicated that a completely exceptional situation had been observed in one Garda District Office by C&AG staff on their audit and in a second Garda District, due primarily to a staff change, the procedures had not been operated. The Minister is assured that the prescribed procedures are operating in these two Garda District Offices and in all other Garda Districts.

The Departments of Finance and Justice are reviewing the scope for further action to improve the execution of warrants with a view to recovering moneys outstanding on foot of unpaid fines. The Committee on Court Practice and Procedure expressed the view that a system of attachment of earnings and of deduction from State grants should be introduced in cases where convicted persons are able but unwilling to pay fines imposed by the District Court. The introduction of a system of attachment of earnings to secure payment of judgement debts generally as well as Court fines, is currently under consideration. This would require legislation. The Minister has also been advised that payment of court fines by instalment is not possible without amending legislation. There is a commitment in the Programme for Partnership Government to revise the law relating to fines and the Minister for Justice has indicated that the commitment will be honoured.

ENVIRONMENT

Paragraph 15 : Award of Advertising Contacts

The Minister has been informed by the Department of the Environment that, because of the nature and urgency of the advertising campaigns in question, strict adherence to the guidelines relating to Government Contracts was not possible. These guidelines are now being observed in all cases.

Paragraph 16 : Proposed National Toxic Waste Centre

The Minister has been informed by the Department of the Environment that the Government decided as early as 1981 that a central waste transfer facility was needed to cope with the problems posed by lack of transfer facilities for hazardous waste. To meet this need it was planned that the Baldonnel Centre would assemble toxic waste for export on a national basis. At that time the view taken was that it would be reasonable to assume that the export option would continue to be available. The Department of the Environment are satisfied that there was no lack of proper planning of the proposals, and that the selection of the site was dictated by locational criteria such as proximity to major arterial roads, industrial concentration, major seaport etc and after consideration of a number of alternative sites.

The site was sold by the national Building Agency on 6 October, 1992 for £135,000. A sum of £129,782 was lodged as an Appropriation-in-Aid in the Department’s Vote after the payment of sale expenses. This compares with total expenditure of £161,152 in acquiring the site.

TAOISEACH

Paragraph 17 : Substitution of National Lottery Funds for Voted Moneys

The Minister has taken note of the Committee’s view that the additional funds required to purchase the new computer equipment would have been more appropriately provided by way of Supplementary Estimate rather than through virement of savings from a subhead originally provided for by voted moneys. The Minister has reviewed procedures for presenting and accounting for Lottery-financed expenditure. All such expenditure, which in 1987 was accounted for under a single subhead in the Vote for the Minister for Finance, is now provided for under separate subheads on the relevant Departmental Estimates and voted as such by the Dail, thus ensuring greater transparency in the use of Lottery funds. Accordingly, the circumstances which gave rise to the Committee’s criticisms should not recur.

DEFENCE

Paragraph 18 : Stocktaking

The Minister endorses the Committee’s comments on the importance of internal audit. In this regard, the Department of Finance, in April 1992, issued its guidelines on internal audit standards. The guidelines expand on the principles of internal audit within Government Departments, which are outlined in the Department’s publication ‘Public Financial Procedures’. They also set out additional guidelines relating in particular to standards to be followed in implementing the internal audit function.

With regard to the situation in the Department of Defence, the Minister has been advised that, in co-ordination with the internal audits carried out by civilian staff, military personnel carry out complete stocktaking of all stores. Stocktaking is carried out in most stores on a yearly basis and on a two - yearly basis in the remaining stores. There are also regular inspections of stores by the QuarterMaster - General’s branch. At present, twelve civilian staff are employed in internal audit, four on a full-time basis and eight on a part-time basis.

PUBLIC WORKS AND BUILDINGS

Paragraph 19 : Cost Overrun in building Garda District HO in Westport

The Minister is aware that there is always an element of risk taken by both parties in a building contract. The Office of Public Works must accept some element of risk at the outset in the tendering process to ensure that there is an equitable distribution of the work available at the most economical cost to the State. Likewise, contractors, in a highly competitive market, must take risks in rating work and reducing their margin of profit to the bare minimum and often below that.

The Minister having examined this particular case is satisfied that appropriate contractual procedures were followed and that the Commissioners were subsequently right to determine the contract having regard to the contractor’s performance on the contract at the time. To have acted differently in order to avoid arbitration would have left them open to a substantial claim by the contractor and a major extra on the contract as well as creating a precedent for further claims during the period of the contract. That the arbitrator should find against the Commissioners was at variance with all the expert opinion obtained by them in the case. Even so, the Minister is satisfied that a more serious situation was avoided.

The Minister is further advised that the Commissioners have given careful consideration to the points raised in the report in regard to Westport Garda Station. The criteria for seeking performance bonds have been reviewed and the Commissioners accept the advisability of erring on the side of prudence when placing contracts.

Paragraph 20 : Claim for repairs to Dun Laoghaire Pier

The Minister understands that the Chief State Solicitor advised the Office of Public Works that Counsel was of the opinion that proceedings by the Commissioners against the owners of the vessel should be allowed to take their course.

Since the transfer of the Harbour from Office of Public Works to the Department of the Marine on 1 January 1989, the Department pursued the matter with the Chief State Solicitor and has supplied additional information sought by him. The Chief State Solicitor sought a breakdown of the claim from the Department, which was furnished in May, 1992. Since then the Department of the Marine has on several occasions sought an update of the position regarding the issue of a Statement of Claim.

In February, 1993 the Chief State Solicitor advised the Department that he is preparing to serve notice of intention to proceed, but that he will not be in a position to predict legal costs involved.

SOCIAL WELFARE

Paragraph 21 : Welfare Fraud

The Minister has been advised that the Department of Social Welfare has substantially implemented the recommendations which arose from the consultant’s examination of its payment systems. A new regional management structure is now in place and this, in addition to providing the administrative infrastructure for improved service to clients, is aimed also at enhancing control measures.

The Comptroller & Auditor General was advised in response to a formal audit query of the substantial progress that had been made in implementing controls both in relation to internal and external exposure to abuse. Details of the progress made were given.

Subsequently during the course of the 1988 PAC hearings, the Accounting Officer elaborated further and gave additional information on the implementation of controls. These included improved I.D. checking, increased segregation of cash handling duties, and greater devolution of decision making. Reference was also made to the extension of the “notification of employees” system which applies to certain “at risk” sectors, including subcontractors. Systems are maintained under constant review and control enforcements are effected on an ongoing basis.

Paragraph 22 : Jobsearch Programme

The Minister has been advised that the main purpose of the Jobsearch programme is to assist the long-term unemployed to compete effectively in the labour market through training courses run by FAS. The additional resources made available for the interviewing of claimants under the programme also had an indirect control impact, as far as unwarranted recourse to unemployment payments was concerned.

The Department of Social Welfare considers that the Jobsearch programme complements the work of the Department’s investigation staff. Its impact is additional to that of existing control measures. Such measures include the External Control Unit and the Joint Investigation Unit. The latter is operated on a joint basis by the Office of the Revenue Commissioners and the Department of Social Welfare. 92 Junior investigators have been appointed as part of the new regional management initiative and these will play an important part in further enhancing the effectiveness of the Department’s control programme.

The Department of Social Welfare is mindful of the need to be vigilant in detecting fraud. It operates a range of control measures and constantly evaluates the need for enhancement of control mechanisms.

Paragraph 23 : Disability Benefit Fraud

The Minister is informed by the Department of Social Welfare that the details of the fraud uncovered in the mining industry in Roscommon/Leitrim are as follows:

The certifiers involved in the miners’ cases were written to in 1992 requesting them to comment on the fact that clients whom they had certified as ill had been involved in concurrent working and claiming of Disability Benefit. The replies received from the doctors indicated that they were satisfied at the time of certification that these clients were ill and certified them accordingly. The doctors stated that they were certainly not aware of the fact that these clients had engaged in employment whilst in receipt of disability benefit nor could they accept responsibility for same.

A subsequent letter was issued to each doctor from the Medical Referee Section informing them that the explanation of the events surrounding their issue of the certificates had been considered and it was decided that in the circumstances no further action would be taken. The doctors were reminded that the Department is at all times concerned to ensure that only genuine claimants receive payments of disability benefit and their cooperation in this endeavour was requested.

A summary of general disability fraud cases (excluding the mining industry) are as follows:

A wide range of control measures are used by the Department of Social Welfare to curb abuses of the Disability Benefit Scheme. Improvements in their operational efficiency have been made over the years and they are now operated in a more systematic and intensive way. Like all control procedures they are kept under review and further improvements will be made where necessary.

Paragraph 24 : Control Procedures and Computerised Systems

The Minister is informed that the Department of Social Welfare is constantly alert to the need for controls in this area. A major review of the computerised payments system in local offices was undertaken. This review included an examination of the control procedures, particularly in the light of experience in the Dublin exchanges. The group which carried out this review concluded that once adequate manual controls of data input were in place and these were combined with comprehensive checking of all transactions, a satisfactory degree of control could be exercised. Comprehensive instructions to effect such controls were issued to local offices in February 1988. These controls were put in place and their implementation is reviewed by the Internal Audit Unit. The Minister is informed that the controls operate well and are effective.

Paragraph 25 : Reconciliation of Unemployment Payments made through Post Offices

The Minister has been advised that the Department of Social Welfare is of the opinion that the final solution to the problem of reconciliation of these payments lies in the computerisation of the Department’s Payments and Accounting systems. These systems are being developed on a phased basis. As an interim measure pending full computerisation, the Department has decided to implement a computerised reconciliation system in the Accounts Branch.

This system, in providing for centralised recording and subsequent matching of the uniquely coded paysheets issued by local offices and returned by An Post, will facilitate the identification and investigation of outstanding paysheet/ expenditure returns.

The system is at present being implemented, with consulting assistance, and is scheduled for operation in 1993. The Department of Social Welfare considers that this system will meet the concerns expressed by the Committee.

Paragraph 26 : Accounting Procedures relating to Supplementary Welfare Payments

The Minister understands that the Department of Social Welfare’s view is that the problems associated with the present system of supplementary welfare payments can be best addressed by keeping recourse to supplementary welfare to a minimum. This requires a speedy response on the part of the Department of Social Welfare in the processing of claims for social welfare benefits/assistance. If an increased number of claimants can be dealt with promptly by the Department, there will be less need for them to fall back on the safety net of supplementary welfare, thereby reducing the volume of payments made by the Health Boards. As a result, the Department and Health Boards should find it easier to monitor, control and account for supplementary welfare.

A number of measures have been or are in the process of being introduced to reduce recourse to supplementary welfare payments. These include:

(i)a reduction in the time taken to process claims in the Department e.g. data base processing at local offices, quicker decision and investigation procedures, faster payment methods;

(ii)the development of the regional management structure which will improve liaison with Health Board staff.

A system of desk interviewing in local Social Welfare offices is being pilot tested in the Eastern Health Board area. It results in payment of entitlements from the first due date in appropriate cases and thereby avoids recourse to Supplementary Welfare Allowance. It is proposed to extend this system nationwide as soon as possible.

The following measures will lead to greater control of the Supplementary Welfare Allowance scheme:

(i)a more streamlined approach to the funding of Health Boards by the Department of Social Welfare in respect of supplementary welfare payments made to claimants pending award of benefit or assistance by the Department of Social Welfare;

(ii)a joint study group has been established recently to examine the existing procedures and is likely to recommend extensive computerisation of the SWA scheme.

(iii)a number of groups have been established, representative of the Health Boards and the Department of Social Welfare, to review jointly strategic and procedural issues with a view to achieving, as far as practicable, uniformity and consistency between payment systems.

The Department of Social Welfare is confident that all these measures, when fully in operation, will significantly reduce the problems referred to by the Comptroller and Auditor General. The effectiveness of the new measures will be kept under review.

Paragraph 27 : Overpayments of Social Insurance and Social Assistance

The Minister is informed that a review of the accounting procedures for Social Insurance and Social Assistance overpayments was undertaken. Following the review detailed proposals were submitted to, and generally sanctioned by the Department of Finance, with effect from 1 January 1990.

The new procedures provide that where no recoveries have been made by the end of the third year after the year in which the overpayment is recorded, or where three years have elapsed since the last recovery, the amounts outstanding will be written off. As all such amounts, under the new procedures, have already been charged in the accounts of the year in which they occurred, this “write off” does not involve any additional charge.

The “write off” of overpayments will not, of course, preclude continuing efforts by the Department to recover the amounts involved as opportunities arise.

REVENUE COMMISSIONERS

Paragraph 28 : Collection of Outstanding Taxes

The Minister is informed that the numbers of certificates in the hands of the Sheriffs at the end of 1988, 1989, 1990, 1991 and 1992 were as follows:

Revised procedures introduced in April 1989 continue in force. Adherence to the guidelines has improved steadily since 1989, as Sheriffs have improved their office systems and installed computer-based facilities for processing certificates.

Collection by the Sheriffs on foot of certificates issued to them has improved appreciably since 1987. The number of certificates on which the sheriffs have collected outstanding taxes and the amounts collected in each year are as follows:

These do not include amounts paid directly to the Collector-General on foot of Sheriffs’ warrants, which amounted to £110m in 1992. Further benefit is derived from the deterrent effect of Sheriff action and this is shown by an increase in the number of taxpayers paying on time.

Paragraph 29 : Procedures for Receipting and Lodgement of Remittances by Collector-General

The Minister is assured that the security controls and procedures for prompt lodgement of remittances referred to in the Report continue to work satisfactorily. In excess of 80% of moneys received continue to be lodged within 24 hours of receipt and effectively 100% is lodged by the third working day following receipt. A system for the automated processing of remittances is being installed in the Collector-General’s Office and is expected to be in operation in the second half of this year.

Since the introduction of the system (July 1991) whereby provincial offices transmit payments to the Collector-General by Bank Giro, £214m. has been transferred. The system is used by Inspectors of Taxes, decentralised offices in Nenagh and Ennis and also Department of Social Welfare local officers who collect PRSI.

Facilities have been made available to taxpayers to pay Income Tax, Corporation Tax, PAYE/PRSI and Value Added Tax using Bank Giro. It is planned to extend the Giro option to all Collector-General payslips. An amount of £58m (16,000 payments) was received by the Collector-General in 1992 from taxpayers using the Giro system.

In the fourth quarter of 1992 the facility to pay PAYE/PRSI and Value-Added Tax by direct debit through the banking system was made available to selected taxpayers. This scheme is linked to the system of annual accounting for both of these taxes. In the first few months of operation a sum of £7m has been received through this method. Approximately 2,500 taxpayers are in the scheme. It is planned to expand the scheme during 1993.

Paragraph 30 : Fraudulent and Attempted Fraudulent Encashment of Cheques.

The Minister is advised that the position regarding fraudulently encashed cheques at end January 1993 is as follows:

Proceedings to recover losses from the banks have now being drafted and cases have been listed for hearing before the High Court. It is expected that the High Court proceedings will not take place for another twelve months. A number of cases are due for hearing before the Circuit and District Courts this year.

Paragraph 31 : Fraud in relation to Motor Vehicle Import Charges

The Minister is informed that on completion of the disciplinary hearings the Personnel Officer submitted his report to the Revenue Commissioners who also endorsed the recommendation of the Personnel Officer and a memorandum was placed before the Government.

However, in view of the possibility of further litigation in this case, the matter must still be regarded as sub-judice as any public airing of the issues involved would be regarded as prejudicial.

Paragraph 32 : Irregularities under the PAYE System

The Minister wishes to assure the Committee that security and integrity of computer data is continually under review. The Revenue Commissioners, however, cannot operate without assuming the basic honesty of its employees, although this assumption should not be taken as suggesting that checks and controls are not necessary. In putting checks and controls in place the following factors must be taken into account:

(a)It is not possible to supervise every transaction either at input stage or subsequently;

(b)The controls must be realistic by reference to the risk involved;

(c)The controls must be such that they do not interfere with the flow of work or service to taxpayers;

(d)Unnecessary and costly overheads in the form of superfluous, non-productive supervisory staff must be avoided;

In practice the following direct controls apply in relation to the input of tax-free allowance details:

(a)Staff only have “input authority” necessary for the work in the area to which they are assigned;

(b)To gain access to the computer system a security badge and related password is required;

(c)A weekly edit list showing all input transactions for each badge is produced at the computer centre and circulated to the appropriate supervisors. This weekly edit list is retained as a record of input and also forms the basis for an audit of transactions;

(d)A random check (audit) is carried out each week on a percentage of the inputs shown on the edit lists. Supervisory staff are regularly reminded of the need for a continuing high profile audit of computer transactions

In addition to the direct controls of TFA (Tax Free Allowance) input, the following controls apply:

(a)There are various checks and controls on other work functions, (e.g. repayments) through which input of incorrect TFA can be detected.

(b)The annual review of TFA which is carried out on selected cases in the course of setting up the TFA for the next tax year.

(c)Staff are transferred between work areas with the result that irregularities would be detected by the successor.

Taking into account the nature of the risks being addressed and the need for general overall efficiency in the use of resources, it is considered that the checks and controls outlined above are adequate and are on a par with those in other organisations where similar risks arise.

FORESTRY

Paragraph 33 : Controls in relation to Pulpwood Sales from State Forests

The Minister is advised that the issue of invoicing is now a matter exclusively for Coillte Teoranta whose commercial procedures have been radically overhauled since their establishment on 1 January 1989.

The general question of access inspection rights for the Comptroller and Auditor General in regard to the commercial State bodies was considered in the Government White Paper on the role of the Comptroller and Auditor General. The White Paper concluded that the C&AG should not have such rights.

The matter was further considered during the Dail debates on the Comptroller and Auditor General (Amendment) Bill 1992. The Bill does not provide for inspection by the C&AG of commercial State sponsored bodies.

Briefly, the arguments against the C&AG’s involvement in inspecting the commercial state bodies are as follows:-

*these bodies are audited by private sector auditing firms and the very highest levels of professional competence and integrity should be expected of those firms in dealing with the bodies concerned.

*it would lead to pressures on the C&AG to “police” the commercial state sector and to involve himself in contentious matters which should properly be the province of the Ministers concerned answering directly to the Dail, of the Gardaí, the Director of Public Prosecutions and the Courts.

*Inspections by the C&AG could possibly compromise the professional liability of the auditors, by giving the C&AG, at least in theory, an overseeing role.

*the Joint Oireachtas Committee on Commercial State-Sponsored Bodies is the Committee of the Oireachtas assigned responsibility for monitoring these bodies.

EDUCATION

Paragraph 34 : Computerised Payroll Fraud

The Minister is assured by the Department of Education that, on discovery of these irregularities, an immediate review was carried out of work practices in the section dealing with Post-Primary Teachers’ payroll. As a result of this review, strict checking procedures and administrative practices have been implemented to ensure the security of the payroll system. These new procedures and practices have been rigorously adhered to as well as formally written into the job guides/work specifications of officers serving in the particular section.

The Minister would point out that, in its service-wide advisory role, the Central Information Technology Services (CITS) Section of the Department of Finance compiles and issues guidelines on various technologies including, where relevant, advice on computer security. Consequent on the recommendations contained in the Committee’s Special Report on Computer Security in Government Departments and Offices, (December 1990), the security advisory function within CITS of the Department of Finance was enhanced and a comprehensive series of advice notes relating to various aspects of computer security was compiled and issued to each Department and Office during 1991.

The first two notes - “Security Guidelines” and “Virus Protection Strategies” - addressed the specific areas of concern highlighted in the special report as requiring short-term actions. The remaining notes - “Security Policy”; “Controls for Information Systems” and “Contingency Planning” - provide advice to Departments and Offices to help them address their longer-term security issues and needs. Other measures taken by the CITS include presentations on information security procedures and techniques and the inclusion of modules on computer security in the IT training programmes organised by the Civil Service Training Centre. The Central IT Services also provide advice to Departments and Offices on security issues generally.

Paragraph 35 : Community School Irregularity

The Minister is advised that the revised accounting and financial procedures for all Community and Comprehensive Schools, introduced on 1st January, 1989, provide, inter alia, for detailed monthly certified statements of payments and receipts by the school. The monthly returns are monitored by the Department of Education and any issues requiring scrutiny are taken up promptly with the school authorities.

The revised procedures also provide for local audit visits by officers of the Department of Education and of the Office of the Comptroller and Auditor General. Local audits have been conducted by the Department in 68 of the 70 Community and Comprehensive Schools. (The two schools not yet audited were only opened in September 1992). These have established that, overall, the revised system is working satisfactorily. The revised accounting arrangements were introduced on the understanding that they would be reviewed in due course in consultation with the Association of Community and Comprehensive Schools, which represents the schools’ managerial authorities. This review took place in 1992 and arising from it a number of amendments have been made to the monthly financial report.

The Minister understands that the revised procedures should preclude a recurrence of irregularities of the type in question.

Paragraph 36 : Errors in ESF claims

The Minister is informed that the errors arose in the main from the complexity of the technique to be used by schools/VECs in arriving at the costs for the programmes, and the volume of claims to be processed in the time available before the EC closing deadline for submission of data. The Minister is advised that a number of steps have been taken by the Department of Education to ensure the accuracy of returns. These include comprehensive guidelines for programme providers making returns, additional consistency checks on data received, double-checking of data entry and computer-spreadsheet formulae, etc. In addition, following an extensive review of the claims process, a revised methodology has been introduced which takes a comprehensive approach to overall school/VEC activity, both ESF-aided and non-ESF-aided. This provides a method through which hours delivered on ESF programmes as a proportion of overall activity are clearly documented, and the resulting factor is applied in a transparent way to the accounts. Financial Control officials from the Commission have indicated that they were very satisfied with the improvements in methodology which have taken place.

HEALTH

Paragraph 37 : Computerisation

The Minister is advised that the Department of Health has continued to make progress in the implementation of the revised computerisation strategy which it adopted in 1988. The strategy has been welcomed by the management of all major health agencies: this is a key factor in ensuring that the benefits offered by computerisation are in fact realised. The introduction of a specific annual budget for computerisation has enabled considerable progress to be made in implementing a significant number of major initiatives while consolidating the Department of Health role in supervising the evolution of a cost effective computing strategy in the Health Sector. The use of a formal strategic IT planning process, supported by an annual budget, should ensure a programme of computerisation which will meet service requirements in an efficient and cost-effective manner. Arrangements for the review of progress and the evaluation of results have been put in place by the Department of Health.

Paragraph 38 : Local Government audit of Health Boards

The Minister is informed that the request by the Committee that the detailed audit report of the Local Government auditor relating to each Health Board’s annual account should be submitted to the Committee, has been complied with and is now standard procedure. Regarding the Committee’s recommendation that the Comptroller and Auditor General be facilitated in every possible way in helping to promote greater public accountability, present arrangements have been developed as far as possible within the existing statutory audit arrangements. Furthermore, the Comptroller and Auditor General (Amendment) Act, 1993, which has recently been enacted, provides that, in future, the C&AG shall audit the accounts of the Health Boards. He will also be empowered to carry out discretionary examinations of the economy, efficiency and management effectiveness of these bodies. Taken together with proposed amendments to the Terms of Reference of the Committee of Public Accounts (paragraph 4.11 of the White Paper on the Role of the C&AG refers), this provision will give the PAC a specific role in examining and reporting on the accounts of the Health Boards.

COMPTROLLER AND AUDITOR GENERAL

Paragraph 39 : Staffing

Having regard to his statutory responsibilities for public service staffing and costs, and to Article 28.4 of the Constitution, the Minister could not support legislation on the lines recommended by the Committee in 1988. This matter was discussed in the Dail during the debates on the Comptroller and Auditor General (Amendment) Act 1993. In the White Paper the Government acknowledged that the extended role of the C&AG provided for in that Bill would have implications in regard to the level of resources required by the Comptroller and Auditor General, and stated that, as the legislation is brought into effect, the Comptroller and Auditor General’s requirements will be reviewed by the Minister for Finance in consultation with the Comptroller and Auditor General.

PART III - MATTERS ARISING IN RESPONSE TO THE MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT OF THE COMMITTEE OF PUBLIC ACCOUNTS ON THE APPROPRIATION ACCOUNTS, 1985 AND 1986

Paragraph 43: Moneys due from the Sale of Timber in State Forests

Moneys due from the sale of timber in State Forests are a matter for Coillte Teo (which was established on 1 January 1989). The Minister is informed that the case of the debt of £215,553 is subjudice.

Paragraph 47: Public Works and Buildings

Arising from a report prepared by Price Waterhouse on the operations of the Office of Public Works, the Department of Finance and the Office of Public Works agreed a programme of reform and reorganisation of that Office. The purpose of the programme is to achieve more commercial management of operations and improve efficiency and effectiveness generally.

A number of reviews have been undertaken and significant progress has been made in implementing the agreed programme. As a result of reorganization carried out to date, the Central Engineering Workshop is operating on a more commercial basis, the Heritage, Parks and Conservation Sections have been restructured and streamlined and cost ranges for the various projects undertaken by OPW have been agreed. It is expected that the Information Technology Plan and the Corporate Plan will be completed by end 1993 and that a fully computerised management accountancy programme will be in place.

Paragraph 50: Cell Doors for Portlaoise Prison

The Committee’s comments in this regard have been noted.